Twitter Files For Initial Public Offering
RENEE MONTAGNE, HOST:
NPR's business news begins with hashtag, IPO.
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MONTAGNE: Twitter has filed for its initial public stock offering. It made the announcement yesterday with a tweet. Interested investors will have to wait a while to see what's in the filing because the company submitted the plan confidentially.
NPR's Laura Sydell reports.
LAURA SYDELL, BYLINE: Though we can't see it, chances are good that Twitter's filing is longer than 140 characters. Twitter was able to file confidentially with the Securities and Exchange Commission under a statute passed in 2012, aimed at companies with less than a billion dollars in revenue.
Stephen Diamond, a professor at Santa Clara University Law School, says the idea is that it allows what are called emerging companies an opportunity to fix filing mistakes before facing public scrutiny.
STEPHEN DIAMOND: Then during the confidential review process under way with the SEC, Twitter could work out those problems.
SYDELL: Twitter's choice to use this strategy may have something to do with what happened when Facebook publicly filed for its IPO.
DIAMOND: The problem was that as Facebook was rolling out the prospectus for its IPO, its business model was running into problems - particularly with respect to advertising revenues generated by mobile.
SYDELL: Diamond says Facebook was then in the embarrassing position of having to make changes to its filing with the press and public watching.
The law that let Twitter stay confidential is called the Jumpstart Our Business Startups. The idea behind the law was to encourage companies to go public by diminishing some of the paperwork connected with the process.
But the downside says Columbia Law Professor John Coffee is that without the extra public scrutiny businesses may actually be emboldened to overstate their profits.
JOHN COFFEE: Remember that the SEC is a body that's underfunded, overworked and strained to its capacity. They don't catch everything.
SYDELL: Twitter doesn't have to reveal its filing until 21 days before it goes on the road to answer questions for investors. But, it will be able to say that the SEC didn't find any problems. The actual date of the public offering has not been announced.
Laura Sydell, NPR News, San Francisco.
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